Increased Public Spending to Support Upgrade of Nigerian Transport Infrastructure

Monday, August 13, 2018/04:45PM/News

Some
N251.4bn ($697.2m) was allocated to the Ministry of Transportation in the
N9.1trn ($25.2bn) 2018 budget, signed into law by President
Muhammadu Buhari in late June, a 30.4% increase on the 2017 allocation.

Of
this, N162.3bn ($450.2m) will go towards a series of new and
ongoing rail projects, including the 1100-km Lagos-Kano standard-gauge rail line,
linking the country from north to south; the Lagos-Calabar connection, easing
travel from east to west; and the new, 2000-km standard-gauge route linking
Port Harcourt in the south-east with Maiduguri in the north-east, expected to
improve connectivity to many inland areas.

Furthermore,
as part of N2.9trn ($8bn) in capital expenditure featured in the budget, an
additional N682.3bn ($1.9bn) – the highest individual allocation – was granted
to the Ministry of Power, Works and Housing, with N344bn ($954.2m) of this to
go towards the construction and rehabilitation of around 70 new road projects.

This
includes N9.6bn ($26.6m) for the fourth phase of the Second Niger Bridge
project, a connection linking the cities of Asaba and Onitsha across the Niger
River, designed to ease congestion on the existing Niger Bridge, and enhance
connectivity between the south-east and western regions.

Other
major road projects include the construction of the Lagos-Shagamu-Ibadan and
Enugu-Port-Harcourt dual carriageways.

Addressing
infrastructure deficit to stimulate growth opportunities

The
efforts to improve transport infrastructure fall under the broader goals of the
government’s Economic
Recovery Growth Plan (ERGP) 2017-20, which, among its aims, hopes to stimulate
economic growth through an improvement in transport services and logistical
efficiency.

Infrastructure
has been a longstanding issue for the country, with transport cited as the
fifth-greatest obstacle to business in the World Bank’s 2014 Enterprise Survey
of more than 2500 local companies, while in the World Economic Forum’s “Global
Competitiveness Report 2017-18”, Nigeria ranked 132nd out of 137 countries in
terms of infrastructure. Meanwhile, the World Bank’s Logistics Performance
Index, which rates trade logistics, placed the country 110th out of 160
countries this year.

Improved
connectivity, especially between inland centres and Nigeria’s maritime ports,
will be vital for the development and recovery of the economy, and will help to
spread the benefits of economic growth, according to industry figures.

Hassan
Bello, executive secretary and CEO of the Nigerian Shippers Council, believes
the challenge is not necessarily to build more infrastructure, but more
efficient and integrated connections as part of an overall transport system.

“Most
cargo is inland, which requires good connections from the ports,” he told OBG.
“Road cargo as the sole mode of transport has led to serious congestions at our
sea ports. We need to have rail and inland waterways and pipelines to
complement road transportation.”

Funding, timing and efficiency pose challenges to planned
projects

While
the government wants to fast-track its standard-gauge rail rollout and other
transport-focused projects, delivering these major developments on time may
prove challenging.

Though
Nigeria is West Africa’s leader in transport infrastructure projects – with six
of the 10-largest schemes in the region currently under development, and 90% of
the region’s rail projects by value – the country often struggles to bring in
capital works on time or on budget, according to a study by Deloitte.

In
its “Africa Construction Trends Report” for 2017, the international consultancy
found transport infrastructure projects undertaken in Nigeria cost on average
14% more than the initial estimates, and take approximately 188% longer to
complete, with an average of seven out of 10 projects delayed.

Factors
affecting delivery include a decline in state funding as the economy fell into
recession in 2016; the devaluation of the currency, leading to higher input
costs; and what is, at times, a slow decision-making process, evidenced by the
lengthy delay in approving this year’s budget, which was tabled in November
2017 but only ratified in June